As any construction contractor knows, an environmental claim can quickly complicate a project and drive up costs. And the risk goes beyond the costs. Environmental claims are notoriously time-consuming, requiring expert legal and claims support, and the liabilities involved can kill a company’s public image and reputation.
But as construction projects have become more complex, the insurance needs of those projects have gotten more complex too, and many contractors still don’t understand the nuances of their insurance policies, especially the many exclusions and exceptions.
Few exclusions have caused as much confusion as the pollution exclusion.
That’s understandable. CGL coverage for pollution-related losses has gone through big changes over the last 40 years, and pollution exclusions have been somewhat of a moving target. Today they can range from specific exclusions such as fungus, mold, and bacteria to total and absolute pollution exclusions.
Various interpretations by the courts have only confused matters. It’s been especially challenging for the construction industry, with some courts finding that naturally occurring materials such as dirt, dust, sand, gravel, clay, and rocks are considered pollutants when they end up in groundwater, a stream, or the air, where they wouldn’t normally be found. There have also been cases of sulfuric gases from drywall, asbestos from scraped ceiling tiles, diesel fumes from equipment, carbon monoxide from faulty heaters, and non-hazardous construction debris being deemed pollutants and excluded from coverage.
The result? An expensive surprise for many contractors.
The simplest way to think of pollution exclusions is to think in terms of contaminants. If you have something that can contaminate something else, a pollution exclusion might be triggered.
For example, let’s say as a contractor, you spray a chemical solution in a client’s attic as part of mold remediation operations. The spray ends up leaking through the attic floor and ceiling, damaging the flooring in the rooms below. Does your standard pollution exclusion apply? Let’s take a look at the facts. The chemical solution is likely a “pollutant” as defined in your CGL policy. There was a release or seepage of the pollutant that caused the damage. And, you brought the chemical solution onto the jobsite to do the work. So yes, the pollution exclusion would apply.
But that’s just one of many possible scenarios, and whether the pollution exclusion is ultimately triggered in any given environmental claim can hinge on a number of factors, including the circumstances of the case or even the whims of the court. And that too often leaves construction companies holding the bag.
How do you avoid this “pollution exclusion surprise”?
Start by gaining a thorough understanding of:
- Every pollution hazard that could be associated with your operation
- The jurisdiction you’re operating in
- The terms of your policies and endorsements.
You also need special financial protection for specialized risks like environmental hazards, and there are policies available that specifically address pollution risks, including the two most common:
- Contractors Pollution Liability (CPL). Contractors pollution liability (CPL) is a contractor-based policy, offered on a claims-made or occurrence basis, that provides third party coverage for bodily injury, property damage, defense, and cleanup as a result of pollution conditions (sudden/accidental and gradual) arising from contracting operations performed by or on behalf of the contractor.
- Pollution Legal Liability (PLL). A PLL policy is a property owner-based policy that provides coverage against contamination risks associated with ongoing facility operations including indoor air quality, fire/explosions, and the release or escape of hazardous materials. Coverage can include third-party liability claims alleging bodily injury and property damages for ongoing and completed operations, clean-up, remediation, defense costs, emergency response, crisis management, transportation, mold, and professional liability, among others.
Don’t be caught off guard by a costly pollution exclusion surprise. Talk to the New York construction insurance specialists at BNC Agency today to find out which coverage will keep your business protected.